TerraCom extends Blair Athol mine-life, reports solid coal production and sales for July

Queensland-based TerraCom (ASX: TER) has extended the life of its Blair Athol mine by 10 years, while reporting its South African operations had produced 614,000 tonnes of coal in July, a performance the company describes as “solid”.

The mine life extension at Blair Athol in central Queensland follows an update to the reserve, which was 19.5 million tonnes of coal at the end of June.

Based on a 2Mtpa sales profile, TerraCom notes this extends the mine’s life by 10 years, giving the mine 14 years of operation under the company’s ownership.

“Blair Athol has already contributed significantly to the TerraCom group and we look forward to a further 10 years contribution from the operation,” TerraCom executive chairman Craig Ransley said.

Operational performance in July

Of the 614,000t of coal produced in South Africa during July, 547,000t was sold domestically, with 67,000t exported.

TerraCom has offtake agreements with the South African power utility Eskom for its Kangala operation (70.5% owned), New Clydesdale and North Block mines, both 49%-owned with TerraCom as operator.

EBITDA (earnings before interest, taxation, depreciation and amortisation) in South Africa for July came to $11 million.

Operations in South Africa have been affected by COVID-19 restrictions.

The company’s Australian operations, including the Blair Athol mine, added another $13.6 million in EBITDA.

The Australian operation is targeting sales in Japan and South Korea.

Building ‘high-yield’ portfolio

TerraCom describes itself as an emerging company “originating as a resource explorer with a large portfolio of operating assets”.

“We are currently enacting a growth strategy towards delivering a mid-tier diversified operating and trading business and have a global focus on the development of a high yielding, diversified asset portfolio for our investors,” it states.

In regard to that strategy, the company earlier this month announced a non-binding memorandum to acquire the Kalia iron ore project in Guinea.

That project contains a mineral body with a target of 4.7 billion tonnes of magnetite banded iron formation, 900 million tonnes of oxide and supergene banded iron formation targeting ferronickel, and a 20km-long magnetite strike.

TerraCom’s plan is to restart production to supply local rebar producers, then increasing production to supply global markets.

Refinance program progressing, bondholders co-operating

Meanwhile, the company’s refinancing program is advancing, with the existing bondholders having recently agreed to extend the maturity of current notes to 3 September.

The new facility provides for up to US$215 million (A$301 million) in funding, with fixed interest up to 9% per annum over seven years.

This will represent an interest savings of about 4% per annum.

Despite COVID-19 challenges, TerraCom has estimated it sold 9.3Mt of coal for the 2021 financial year from its operations in Australia and South Africa.

The company also has three undeveloped coal projects in South Africa.